North American private credit managers see stabilizing default conditions as discipline deepens

Ocorian research finds vigilance remains high, but confidence grows in the sector’s ability to absorb stress and deploy capital selectively

North American private credit fund managers expect conditions around financial distress and defaults to stabilize and gradually improve over the next 12 months, according to new independent research commissioned by Ocorian, a leading U.S. and global asset services provider.

The study, conducted among U.S. and Canadian private credit managers overseeing $1.0 trillion in assets under management, points to a market that is neither complacent nor defensive, but increasingly disciplined as it matures and absorbs the effects of rapid growth.

More than four in five managers (84%) expect the level of financial distress and defaults among borrowers to improve in the year ahead, while a further 10% expect conditions to remain broadly unchanged. Only a small minority (6%) anticipate a deterioration. The findings suggest managers believe current stress is manageable and already reflected in underwriting standards, pricing and portfolio monitoring.

Managers point to tighter structuring, enhanced borrower engagement and greater selectivity as central to their outlook. Increased use of payment-in-kind (PIK) interest is widely expected, with 90% anticipating some growth over the next two years. Rather than being viewed as a solution in itself, PIK is seen as a cash-flow management tool that can provide borrowers with breathing space, while requiring closer scrutiny and more active oversight by lenders.

At the same time, managers remain clear-eyed about the risks associated with the sector’s rapid expansion. The global private credit market, estimated at around $3 trillion at the start of 2025 and projected to reach $5 trillion by 2029**, continues to attract capital, intensifying competition for assets.

Around 71% of managers describe themselves as very concerned about the risk that strong inflows could encourage aggressive lending, with the remainder quite concerned. This lack of complacency reflects heightened awareness of underwriting discipline as a differentiator in a more crowded market.

Managers are also alert to the inherent opacity of private credit markets, acknowledging that limited transparency can complicate valuation and risk assessment. However, respondents emphasize that this opacity is a longstanding feature of the asset class rather than a new vulnerability, reinforcing the importance of governance, reporting and operational controls.

All managers surveyed reported elevated vigilance around pockets of financial distress and default risk, with more than half (55%) describing themselves as very concerned. This concern is framed not as alarm, but as a core part of professional risk management in a market designed to price, monitor and manage credit stress.

Vincent Calcagno, Head of U.S. Growth at Ocorian, said: “While private credit managers are leaning into risk, they are not ignoring it. The expectation of continued growth sits alongside a clear-eyed assessment of risk, valuations and policy uncertainty. This is a market that is adapting, not retreating.”

* Ocorian commissioned independent research company PureProfile in December 2025 to interview 31 private credit fund managers in the U.S. and Canada working for firms with $1.043 trillion assets under management

** Private Credit Outlook: Estimated $5 Trillion Market by 2029 | Morgan Stanley

About Ocorian 

Ocorian is a global leader in fund services, corporate and trust services, capital markets, and regulatory and compliance support.

Unlocking new value for its clients across jurisdictions and service lines is Ocorian’s priority; it manages over 20,000 structures on behalf of 9,000+ clients including financial institutions, large-scale international organisations, and high-net-worth individuals.

Ocorian provides fully compliant, tailored solutions that are individual to clients’ needs, no matter where in the world they hold financial interests, or however they are structured.

The group offers a full suite of corporate, fund and private client services across a network of offices spanning all the world’s financial hubs. Locations include Bermuda, BVI, Cayman, Denmark, Finland, Germany, Guernsey, Hong Kong, Ireland, Isle of Man, Jersey, Luxembourg, Mauritius, Netherlands, Norway, Singapore, Sweden, UAE, the UK, and the U.S.

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